Going After Mom and Pop

If you want a good example of what’s wrong with the U.S. patent system, just talk to Tim Beere and Cathy Brand-Beere of Fort Wayne, IN. This couple owns the quintessential mom-and-pop operation-DeBrand Fine Chocolates. The 15-year-old confectionery has three Indiana stores, and it also does a good deal of mail-order business over its Web site. Now, through no fault of their own, the Beeres are entangled in a disgraceful and costly patent fight that threatens to sour their otherwise sweet business success.

As Tim Beere recounts the bitter tale, one day last fall a local officer knocked on the door and served the couple with an unexpected lawsuit. The lawsuit, filed by a company the Beeres had never heard of, claimed that the Beeres’ online chocolate business infringed two of its patents and demanded a $5,000 licensing fee if DeBrand Fine Chocolates wanted to continue selling products online. Beere says, “At first we thought it must be a practical joke.”

But it’s no joke. DeBrand Fine Chocolates is one of 50 unsuspecting small businesses, which in just the last few months have been sued by a San Diego outfit known as PanIP-short for Pangea Intellectual Properties. PanIP is a no-employees paper tiger of a company-technically, a limited-liability corporation-formed by self-proclaimed inventor Lawrence Lockwood to capitalize on several e-commerce patents he holds. With five rounds of lawsuits under way, PanIP finds and sues 10 to 12 additional businesses every month.

Lockwood’s scheme has been diabolically simple. First, he garnered a couple of absurdly broad patents. Judging by the thousands of tangled and overlapping e-commerce patents that have been handed out in recent years, such patents are easy to come by. Next, he hired a tenacious lawyer, formed a company, and began filing lawsuits. Now, he picks his quarry carefully. Lockwood’s attorney, Kathleen Walker, says her client merely wants recompense for the 20 years he has spent inventing. Ultimately, Walker says, Lockwood plans to sue “any and all infringers,” a group that she admits could include just about anyone doing business on the Internet.

But there is little question about the kinds of companies PanIP has gone after. The lawsuits target small, successful, independent enterprises that do business on the Internet and are located far from urban corridors of power. DeBrand Fine Chocolates is a perfect victim. So is Delasco Dermatologic Lab and Supply, a skin care products company with fewer than 100 employees, in Council Bluffs, IA. Ditto for Can-Do National Tape in Nashville, TN; River City Meat Company in Kansas City, MO; and, in the latest round of PanIP lawsuits, Double “H” Western Wear in Salem, OR.